I. Doctrine of Prospectivity of Tax Laws
1. What is the “Doctrine of Prospectivity of Tax Laws”? As a general rule, tax laws are prospective in operation, 1 unless the the legi legisl slat ativ ivee inte intent nt that that stat statut utee shou should ld oper operat atee retr retros ospe pect ctiv ivel ely y is 2 distinctly expressed or necessarily implied. Where a statute amending a tax law is silent as to whether it operates retroactively, the amendment will not be given a retroactive effect so as to subject to tax past transactions not subject to tax under the original act. Every case of doubt doubt must be resolved resolved against its retroactive retroactive effect. II. Doctrine of Imprescriptibility Imprescriptibility
2. What is the “Doctrine of Imprescriptibiity”? Imprescriptibiity”? !onsidering that taxes are the lifeblood of the government, it may be stated that the assessment and collection of taxes are imprescriptible unless otherwise provided provided by the tax law itself. " #hus, if the tax law itself itself is silent on prescription, the right of the government to assess and collect taxes will not prescribe. $n criminal cases involving tax offenses punishable under the #ax !ode, it would indeed seem that tax cases are practically imprescriptible for as long as the period from the discovery and institution of judicial proceedings for its investigation and punishment, up to the filing of the information in court does not exceed five (5) years. As the provision% of the law stands in the statute boo& 'and to this day it has remained unchanged(, prescription is a matter of defense and the information does not need to anticipate and meet it. #he defendant could, at most, object to the introduction of evidence to defeat his claim of 1
Because taxes are burdens and should not be imposed without due process of law. Belle Corp. v. CIR, G.R.181298, Jan. 10, 2011 2
Lorenzo v. Posadas Posadas, ! "hil. #$#% CIR. v. Filipinas Cia. de Seguros, 10& "hil. 10$$
3 4 5
CIR v. Marubeni Marubeni Corporation, Corporation, #&2 '(R) $& *2001+ CIR v. Ayala Securities Corp., 101 '(R) 2#1
'ec. 281, -R(
prescription. Anyway, the law says that prescription begins to run from ... )the institution of judicial proceedings for its ... punishment.) *nless amended by the legislature, this provision stays in the #ax !ode as it was written during the days of the !ommonwealth. And as it is, must be applied regardless of its apparent one+sidedness in favor of the overnment. $n criminal cases, statutes of limitations are acts of grace, a surrendering by the sovereign of its right to prosecute. #hey receive a strict construction in favor of the overnment and limitations in such cases will not be presumed in the absence of clear legislation. III. Double Taxation
!. What is the meanin" of #o$be taxation? taxation? BQ2015, 2014, 2013, 2012 “Do$be taxation” means taxing the same property person activity twice when it should be be taxed only once/ that is, taxing taxing the same propertypersonactivity propertypersonactivity twice by the same jurisdiction, during the same taxing period for the same purpose and for the same &ind of tax by the same taxing authority when it should only be taxed but once. once . 0 %. What are the &in#s &in#s of #o$be taxation? taxation? BQ2015, 2014, 2012 'a( In the )trict )ense )ense - ouble taxation in the strict or prohibited sense sense is called called “#irect #o$be taxation” which which is objectionable because it is a violation of the substantive due process under the !onstitution since the same property or subject matter is taxed twice when it should be taxed once/ it is tantamount to taxing the same person twice by the same jurisdiction for for the same thing. therwise described as “#irect #$picate taxation*” the the following are the elements of direct double taxation3 #he two taxes must be imposed3 '1( on the same person, property or subject matter, '2( for the same purpose, '( by the same taxing authority, '"( within the same territory or taxing jurisdiction, 6
!ilio . Li!, Sr., v. CA, GR os. /!81#!/#&, ct. 18, 1990
&
"ursery Care Corp v. City o# Manila , GR 180$1, Jul #0, 201!
'%( during the same taxing period/ and '-( the taxes must be of the same &ind or character. 4 'b( In the +roa# )ense - ouble taxation in the broad sense is called “in#irect #o$be taxation” or “in#irect #$picate taxation” which extends to all cases in which there are two or more pecuniary impositions, but the ABSENE !" !NE !# $!#E of t%e above& #he mentione' elements ma(es t%e 'ouble taxation in'irect. !onstitution does 5# prohibit the imposition of double taxation in the broad sense because it does not violate the substantive due process since no actual double taxation occurred. ,. What are the &in#s of in#irect #$picate taxation? BQ2013 #here are two &inds of indirect duplicate taxation, namely3 '1 ( Domestic #o$be taxation. + #his arises when the same taxes are imposed by the local or national government within the same 6tate. ouble taxation may not be invo&ed where one tax is impose# by the nationa "overnment an# the other by a oca "overnment , being widely recogni7ed that there is nothing inherently obnoxious in the re8uirement that licenses or taxes be exacted with respect to the same occupation, calling or activity by both the state and its political subdivision. 9 #hus, double taxation does not exist when a corporation is assessed with local business tax as a manufacturer, and at the same time, :A# as a person selling goods in the course of trade or business. '2) Internationa -$ri#ica #o$be taxation ; $t refers to the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical periods. 1< When an item of income is taxed in the =hilippines and the same income is taxed in another country, there is a case of double taxation but it is only a case of indirect duplicate taxation, which is called international juridical double taxation,! which is not legally prohibited because the taxes are imposed by different taxing authorities. . Is #o$be taxation aowe# in o$r /onstit$tion? 8
S$edis% Matc% P%ils. Inc. v. &%e &reasurer o# t%e City o# Manila, G.R. 181277, July 3, 2013 (700 SCRA 428) I bid' "ursery Care Corp. v. Ant%ony Acevedo ( t%e City o# Manila, GR 180$1, Jul #0, 201!. 9
Punzalan v. Mun. Board o# Manila , 9$ "hils. ! *199!+% City o# Baguio v. )e Leon, 2$ '(R) #8
*198+ 10
CIR v. SC *o%nson and Son., Inc. #09 '(R) 8& *1999+
#he 6upreme !ourt held that there is no constitutional prohibition against double taxation in the =hilippines. 11 #herefore, it is not a valid defense against the validity of a tax measure. 12 >owever, it is not favored but the same is permissible, provided some other constitutional re8uirements are not thereby violated. 1 ?or example, double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity1" or by the same jurisdiction for the same purpose, 1% but not in a case where one tax is imposed by the 6tate and the other by a province, city or municipality.10. Is #o$be taxation a vai# #efense a"ainst the e"aity of a tax meas$re? 5o. ouble taxation standing alone and not being forbidden by our fundamental law is not a valid defense against the legality of a tax measure. 10 >owever, if double taxation amounts to a direct duplicate taxation, that the same subject is taxed twice when it should be taxed but once, in a fashion that both taxes are imposed for the same purpose by the same taxing authority, within the same jurisdiction or taxing district, for the same taxable period and for the same &ind or character of a tax, then it becomes legally objectionable for being oppressive and ine8uitable. 4. !an a court impose local business tax on manufacturers of li8uors, distilled spirits, whins and other article of commerce. . Is there #o$be taxation where a essor of a property pays rea estate tax on the premises bein" ease#* a rea estate #eaers tax base# on renta receipts an# income tax on the rentas? 5o. #here is no double taxation here in the prohibited sense. ouble taxation in the prohibited sense means '1( taxing for the same tax period, '2( the same thing or activity twice, '( when it should be taxed but once, '"( by the same taxing authority, '%( for the same purpose, and '-( with the same &ind or character of tax. #he real estate tax is a property tax.
11 12 13 1!
+illanueva v. Iloilo, 2 '(R) $&8, ec. 28, 198 Pepsi Cola v. Mun. o# &anauan, GR /#11$, 3eb. 2&, 19& *9 '(R) !0+ Pepsi Cola Bottling Co. v. City o# Butuan, GR /2281!, )u4. 28, 198 CIR v. Lednicy GR /1819, Jul #1, 19! *11 '(R) 09+
1$
SMB, Inc. v. City o# Cebu, GR /20#12, 3eb. 2, 19&2 *!# '(R) 280+
1
Punzalan v. Mun. Board o# City o# Manila, $0 G 2!8$
17
Pepsi Cola v. Mun. o# &anauan, GR /#11$, 3eb. 2&, 19& *9 '(R) !0+
n the other hand, the real estate dealer@s tax is a tax on the privilege to engage in business of real estate dealership. While the income tax is a tax on the privilege to earn an income. #hese taxes are imposed by different taxing authorities and are essentially of different &inds and character. 14 3. Is there #o$be taxation when the interest income of a ban& #erive# from its ban& #eposits in another ban& is s$b-ecte# to tax an# it wi a"ain be s$b-ecte# to the ,4 "ross receipts tax on its interest income from its oan transactions? BQ2012 5o. #here is no double taxation when the interest income of a ban& from its ban& deposits in another ban& had been subjected to the 2< final withholding tax 'which is a passive income and a direct tax(, and at the same time, its interest income on loan transactions to its debtors+customers is subjected to the % gross receipts tax 'which is considered as active income and indirect tax( because the first tax is income tax, while the second tax is business tax. 15. /an a m$nicipa mayor ref$se to si"n an or#inance which re6$ires that a estabishments sein" i6$or sho$# pay a fixe# ann$a fee an# at the same time imposin" a saes tax e6$ivaent to ,4 of the amo$nt pai# for the p$rchase or cons$mption of i6$or in the sai# estabishments on the "ro$n# that it wo$# constit$te #o$be taxation? 5o. #he refusal of the mayor is not justified. #he impositions are of different nature and character. #he fixed annual fee is in the nature of a license fee imposed through the exercise of police power while the % tax on purchase or consumption is a local tax imposed through the exercise of taxing powers. Both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article and this is not in violation of the rule against double taxation.19 11. Is there #o$be taxation in the imposition of oca b$siness tax base# on "ross reven$e in the case of a taxpayer whose metho# of acco$ntin" is on the accr$a basis? Ces. $n petitioner@s case, its audited financial statements reflect income or revenue which accrued to it during the taxable period although not yet actually constructively received or paid. #his is because petitioner uses the accrual method of accounting, where income is reportable when 18 19
+illanueva v. City o# Iloilo, 2 '(R) $&8 Co!pania -eneral de &abacos de Filipinas v. City o# Manila, 8 '(R) #& *19#+
all the events have occurred that fix the taxpayer@s right to receive the income, and the amount can be determined with reasonable accuracy/ the right to receive income, and not the actual receipt, determines when to include the amount in gross income. #he imposition of local business tax based on petitioner@s gross revenue will inevitably result in the constitutionally proscribed double taxation + taxing of the same person twice by the same jurisdiction for the same thing ++ inasmuch as petitioner@s revenue or income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid. #hus, respondent committed a palpable error when it assessed petitioner@s local business tax based on its gross revenue as reported in its audited financial statements, as 6ec. 1" of the D! and 6ec. 22'e( of the =asig evenue !ode clearly provide that the tax should be computed based on gross receipts. 2< 12. What are the mo#es of avoi#in"7eiminatin" #o$be taxation? #he usual methods of avoiding the occurrence of double taxation are3 'a( 8nterin" into tax treaties with other states. + ouble or multiple taxation is avoided by means of allowing reciprocal exemptions, which may be done either by statute or by treaty. *b) 9ppication of the principe of reciprocity + Exemption from taxation by treaty are generally granted on grounds of reciprocity 21 and to lessen the rigors of international double or multiple taxation. *c ) 9owance of #e#$ction7tax cre#it for forei"n taxes pai# + #he rigors of international double taxation may also be lessened by the allowance of deduction or tax credit taxes paid to foreign countries. 22 Example3 A resident ?ilipino citi7en has the option to either claim the amount of income tax withheld abroad as a deduction from his gross income in the =hilippines or to claim it as a tax credit 2 provided that he includes the subject income in the computation of his worldwide gross income considering that he is a resident ?ilipino citi7en. A resident ?ilipino citi7en is subject to tax on his income derived from within and without the =hilippines or his worldwide income.
20
ricsson &eleco! vs. City o# Pasig, GR 1&&, o5. 22, 200&* $#8 '(R) 99+
21
Reciprocity is used to denote the relation between two states when each of them, b their respecti5e laws or b treat, 4i5es the citi6ens or nationals of the other 'tate certain pri5ile4es, as in the practice of a profession, on condition that its own citi6ens or nationals shall en7o similar pri5ile4es in the latter state. Sison v. Board o# Accountancy, 8$ "hil. 2& *19!9+ 22 23
'ec. #!*(+, -R( 'ec. #!*(+*1+*B+, -R(
*') :sin" the Tax )parin" ;$e ; A non+resident foreign corporation '5?!( who earned cash andor property intercorporate dividends from a domestic corporation is taxed on a reduced rate of 1% tax on dividends 'in lieu of the < corporate income tax(, which represents the difference between the regular income tax of < and the 1% tax on dividends on the condition that the country of residence of the 5?! shall allow a credit against the tax due from the 5?!, taxes deemed to have been paid in the =hilippines. 2"
#he apparent rationale for doing away with double taxation is to encourage the free flow of goods and services and the movement of capital, technology and persons between countries, conditions deemed vital in creating robust and dynamic economies. 2% I+. Escape from Taxation
1!. What are the forms of escape from taxation? #axpayers escape paying their taxes thru the following modes, although the modes used may not necessarily be legal, and therefore, sanctionable. 'a( 6hifting the tax burden to another taxpayer. 'b( #ax avoidance. 'c ( #ax evasion. A. S%iftin, of Tax Bur'en
1%. What is the meanin" of the term “shiftin" of tax b$r#en”? “)hiftin" of tax b$r#en” simply means that the imposition of tax is transferred from the statutory taxpayer, or the person who is re8uired by law to pay the tax, to another person who shall bear the burden of the tax without violating the law. nly the payment of indirect taxes may be shifted to another taxpayer, but not direct taxes. Example3 *nder the :A# system, the seller can shift the burden of the :A# to the buyer, the said tax ':A#( being an indirect tax. 1,. What are the ways of shiftin" the b$r#en of tax to another taxpayer? #he ways of shifting the burden of tax to another taxpayer are as follows3
24
'ec. 28*B+*$+*b+, -R(% CIR v. P-MC, GR 8#8, ec. 2, 1991
2$
CIR v. SC *o%nson and Son, Inc ., #09 '(R) 8& *1999+
(")
1. What are the taxes which can be shifte# to another taxpayer? *nder the 5ational $nternal evenue !ode, the national taxes which can be shifted to another taxpayers are the indirect taxes, such as the :A#, ther percentage taxes, excise tax on excisable articles and documentary stamp taxes. $n the case of :A#, the seller, who is the statutory taxpayer, is given the right by law to shift the burden of tax to the buyer, which tax shall become part of the cost of the goods or services sold if the buyer is the end consumer. 10. What are the taxes which cannot be shifte# to another taxpayer? *nder the 5ational $nternal evenue !ode, all taxes which are the direct tax liabilities of the taxpayers are the taxes which cannot be shifted to another taxpayer, such as income tax, estate tax and donorFs tax. 1. Why #oes the aw aow the shiftin" of the b$r#en of tax to another person? When the law allows that the burden of tax may be shifted to another person, this is one form of escape from taxation which does not result to any loss on the part of the overnment, hence, not objectionable. 13. What is the meanin" of “impact” an# “inci#ence” of taxation? #he term )impact of taxation% refers to the point on which the tax is originally imposed or the persontaxpayer who is re8uired by law to
pay the tax or the taxpayer on whom the tax can be formally assessed. Example3 :A# is originally assessed against the :A#+registered SELLE# who is re8uired to pay the said tax. '#his is the so+called -impact of taxation.)( n the other hand, >inci#ence of taxation - refers to the point on which the tax burden finally rests or settles down. $t ta&es place when shifting has been effected from the statutory taxpayer to another. >ence, :A#, being an indirect tax, the burden of paying the tax is actually shifted or passed on to the B/E#. '#his is the so+called )inci#ence of taxation.%) 25. What is the reationship between Impact* )hiftin"* an# Inci#ence of a tax? #heGimpact of taxation*” which is the imposition of the tax to the statutory taxpayer, is the initial phenomenon/ the H shiftin" of the tax,G which is the passing on of the tax to the buyer, is the intermediate event, while the Hinci#ence of the taxG which is the final point of the transaction ma&es the end consumer finally shouldering or bearing the burden of the tax, which is the resultant effect. B. Tax Avoi'ance
21. What is the meanin" of “tax avoi#ance”? BQ2014 >Tax avoi#ance> is the other term for >tax minimiation.> $t is a legal tax saving device within the means sanctioned by law the object of which is merely to minimi7e the payment of taxes. #his method should be used by the taxpayer in good faith and at arm@s length. A taxpayer has the legal right to decrease the amount of what otherwise would be his taxes or altogether avoid them by means which the law permits. A taxpayer may therefore perform an act that he honestly believes to be sufficient to decrease his tax liability or to exempt him from taxes. >e does not incur fraud thereby even if the act is thereafter found to be insufficient. 2. Tax Evasion
22. What is the meanin" of “tax evasion”? >Tax evasion> is the other term for “tax #o#"in".” $t is the use of the taxpayer of illegal means to avoid or defeat the payment of the tax. $t 26
utivo Sons /ard$are Co. v. C&A, 1 '(R) 10 *191+% /eng &ong &e0tiles Co., Inc. v. CIR, 2! '(R) && *198+
is a scheme used outside of those lawful means and when availed of is punishable by law because its main purpose is to entirely escape the payment of taxes thru illegal means. $t usually subjects the taxpayer to further or additional civil or criminal liabilities. 20 #ax evasion connotes fraud through the use of pretenses and forbidden devices to lessen or defeat the payment of correct taxes. Iere understatement of tax in itself does not prove fraud. ?raud is never imputed and courts never sustain findings of fraud upon circumstances which create only suspicion/ it must be willful and intentional . 2!. Distin"$ish >tax avoi#ance> from >tax evasion.> BQ2014 Tax Avoi'ance &ax avoidance! is a tax saving device wherein the taxpayer uses legal means to reduce tax liability within the means sanctioned by law, hence legal.24 $t is used by the taxpayer in good faith and at arm@s length.
#axpayer is not subjected to civil or criminal liabilities because it is a legal tax saving device. $t is “tax minimiation”.
Tax Evasion &ax evasion! is the use of illegal means to avoid or defeat the payment of the tax.
$t connotes fraud through the use of pretenses and forbidden devices to lessen or defeat the payment of correct taxes. When availed of, it usually subjects the taxpayer to additional civil or criminal liabilities. $t is “tax #o#"in"”.
2%. What are the factors that constit$te “tax evasion”? #o constitute >tax evasion*> there must be an integration of three factors, namely3 '1( #he end to be achieved, i.e., payment of an amount of tax less than what is &nown by the taxpayer to be legally due/ '2( An accompanying state of mind which is described as being evil, in bad faith, willful or deliberate and not merely accidental/ and '( A course of action or failure of action which is unlawful.
27 28
CIR v. CA, #2& "hil. 1 /eng &ong &e0tiles Co., Inc. v. CIR, 2! '(R) && *198+
#he second and third factors are not present in tax avoidance, hence there can be no tax evasion if what was committed is just tax avoidance.29 Example3 When a tax consultant advised the taxpayer to execute two deeds of sale with the intent to evade the payment of the correct tax, both the tax consultant and the taxpayer shall be criminally liable for tax evasion considering that the above+stated three re8uisite factors to constitute tax evasion are present. 2,. When is tax evasion #eeme# compete? #he 6upreme !ourt ruled that tax evasion is deemed complete when the violator has &nowingly and willfully filed a fraudulent return with intent to evade and defeat a part or all of the tax. < +. Exemption from Taxation
2. What is the meanin" of the term “exemption from taxation>? Tax exemption is an immunity or privilege from a charge or burden to which others are subject. $t is the grant of immunity, express or implied, to particular persons or corporations of a particular class, from the obligation to pay taxes generally within the same state or taxing district to which others are obliged to pay. 1 20. What is the nat$re of tax exemption? 'a( #he tax exemptions provided in the !onstitution are self+ executing and need no legislation to enforce them. 'b( #he grant of tax exemption is a matter of legislative policy that is within the exclusive prerogative of !ongress.2 'c( Exemption from taxes is personal in nature and covers only taxes for which the taxpayer+grantee is directly liable. $n any case, it cannot be transferred or assigned by the person to whom it is given without the consent of the 6tate. >e who claims tax exemption should prove by convincing proof that he is exempted. #herefore, an exemption granted to a corporation does not apply to its stoc&holders. 29 30 31
CIR v. &%e state o# Benigno P. &oda, *r., G.R.1!&188, 'ept. 1!, 200!. * !8'(R) 290+ 1ngab v. *udge Cusi, *r ., 18 "hil. 0! *1980+ -reen#ield v. Meer, && "hil #9!
32
)iaz v. Sec. o# Finance, $! '(R) 9 *2011+
33
Manila -as Corp. v. Collector , &1 "hil. $1#
'd( #ax exemptions are not presumed, but when public property is involved, tax exemption is the rule, and taxation, the exception. 'e( #here can be no simultaneous tax exemptions under two laws, one partial and the other total. 'f( $t is an ancient rule that exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. #ax exemptions are loo&ed upon with disfavor and may almost be said to be odious to the law. " 'g( >e who claims that he is exempted from tax must be able to justify his claim by the clearest grant of organic or statute law by words to plain to be mista&en. $f ambiguous, there is no tax exemption. 2. What are the &in#s of tax exemption? #he &inds of tax exemptions are as follows3 '1( 8xpress tax exemption 'or affirmative exemption( ; #his is the tax exemption which expressly and affirmatively exempts from taxation certain persons, properties or transactions, either entirely or in part. $t may be created by express provisions of the !onstitution, statute, treaty or ordinance. '2( Impie# tax exemption 'or exemption by omission( ; #his is the tax exemption which may be either accidental or intentional, as where the tax is laid on certain classes of persons, properties or transactions without mentioning other classes. All subjects for which taxation is not provided are exempted, and the subjects selected are alone taxable. #ax exemptions are not presumed, but when public property is involved, exemption is the rule, and taxation, the exception *0) /ontract$a tax exemption - !ontractual tax exemption, in the real sense of the term and where the non+impairment clause of the !onstitution can rightly be invo&ed, is one which is agreed to by the taxing authority in contracts, such as the one contained in government bonds or debentures, lawfully entered into under enabling laws in which the government, acting in its private capacity, sheds its cloa& of authority and waives its governmental immunity. % #his exemption must not be confused with the tax exemption granted under a franchise, which is not 34
MRALC2 v. +era, & '(R) #$1% P%il. Petroleu! Corp. v. Mun. o# Pililla, Rizal , 198 '(R)
82 *1991+ 35
PA-C2R v. BIR, *o%n )oe ( *ane )oe, GR 1&208&, arch 1$, 2011
a contract within the context of non+impairment clause of the !onstitution.$n general, tax exemptions granted by contract are not assignable. >owever, !ongress may authori7e a transfer of the tax exemption either by the original act or by a subse8uent statute. A contractual tax exemption may also be transferred where the original grant includes the successors and assigns of the grantee. 0 6tatutory exemptions are generally granted on the basis of contract and on grounds of public policy. 23. What is the rationae for the "rant of tax exemption? #he rationale for the grant of tax exemption is some &ind of public benefit or interest which the law+ma&ing body considers sufficient to offset the monetary loss entailed in the grant of tax exemptions. !5. What are the "ro$n#s for tax exemption? '1( #he power of the Degislature to exempt taxpayers from taxation, although of wide scope, is not unlimited. Exemptions from taxation, when properly made, must be determined in the legislative discretion, which must not, however, be arbitrary/ there must underlie in its exercise some principles of public policy that can support a presumption that the public interest will be subserved by the exemption allowed. 4 '2( #he purpose of the grant is some public benefit or interest which the law+ma&ing body considers sufficient to offset the monetary loss entailed in the grant of tax exemptions. '( #ax exemptions in tax treaties are created on ,roun's of reciprocity or to lessen t%e ri,ors of t%e international 'ouble or multiple taxation. !1. @ay tax exemption be "rante# on the "ro$n# of e6$ity? 5o. #ax exemption cannot be recogni7ed on grounds of e8uity. #he long range objective of all tax measures is the accomplishment of social order. Although the variant forms of taxation may sometimes 36
Cagayan lectronic Co. v. CIR , 1#8 '() 29
37
PAL v. Co!!issioner o# Custo!s, B) o.18!, 'ept. 10, 19$!
38
)rt. 1&*!+, )rt. :---, 198& "hil. (onstitution% CIR v. Botel%o S%ipping Corp ., /21##/#!, June 29, 19& *20 '(R) !8&+
produce individual hardships, a too stilted interpretation of tax laws for the benefit of one particular taxpayer may result in the loss of revenue at the expense of the government and operate to the disadvantage of the others contributing to its support. A tax exemption claimed merely on the ground that another person similarly situated has not paid similar taxes is unjustifiable and should be ignored. 9 !2. @ay tax exemptions be revo&e#? Ces. As a ,eneral rule, grants of tax exemption are revocable. #he !ongressional power to grant an exemption necessarily carries with it the conse8uent power to revo&e the same. $n the case of franchises to operate public utilities, the !onstitution provides that no franchise shall be granted unless subject to the condition that it shall be subject to repeal or amendment. #herefore, any exemption granted under a franchise may be revo&ed by !ongress. Exception1 n the other hand, there is a recogni7ed exception as regards contractual exemptions, on the theory that revocation without the consent of the grantee would impair the obligation of contract. #here is no vested right in a tax exemption, more so when the latest expression of legislative intent renders its continuance doubtful. Being a mere statutory privilege, a tax exemption may be modified or withdrawn at will by the granting authority. #o state otherwise is to limit the taxing power of the 6tate, which is unlimited, plenary, comprehensive and supreme. #he power to impose taxes is one so unlimited in force and so searching in extent, it is subject only to restrictions which rest on the discretion of the authority exercising it. "<
:$. Tax #efun' !!. What is the nat$re of a caim for ref$n#? 6ince an action for a tax refund parta&es of the nat$re of tax exemption, which cannot be allowed unless granted in the most explicit and categorical language, it is strictly construed against the claimant who must discharge such burden most convincingly. "1 !%. Wi the fact that a taxpayer is $n#er a$#it by the +I; or that there is a #eficiency tax assessment an# it has a potentia tax iabiity be a bar to a caim for tax ref$n#? 39 40 41
BPI v. &rinidad, !$ "hil. #8! Republic v. Caguioa, GR 18$8!, ct. 1$, 200& Sout% A#rican Air$ays v. CIR, 12 '(R) $
5o. As a general rule, a deficiency tax assessment is not a bar to a claim for tax refund or tax credit of a taxpayer. #he B$ has no valid justification if it will not grant the refund or to withhold the issuance of the #ax !redit !ertificate '#!!(. ffsetting the amount of #!! against a potential tax liability is not allowed, because both obligations are not yet fully li8uidated. While the amount of the #!! has been determined, the amount of deficiency tax is yet to be determined through the completion of the audit. #o reopen the claim for #!! or #ax efund in order to give way to the introduction of evidence of a deficiency assessment will lead to an endless litigation, which is not allowed. "2 >owever, if t%e 'eficiency tax assessment is alrea'y final2 the !$ should not grant the claim for refund unless the taxpayer pays the deficiency tax. Di&ewise, no tax refund or tax credit will be granted as long as t%ere is a pen'in, 'eficiency tax assessment for t%e same taxable perio'. #o award a tax refund or tax credit despite the existence of deficiency assessment for the same taxable period is an absurdity and a polarity in conceptual effects. A taxpayer cannot be entitled to a refund and at the same time be liable for a tax deficiency assessment. $n order to avoid multiplicity of suits, it is logically necessary and legally appropriate that the issue of deficiency tax assessment be resolve' 3ointly with the taxpayerFs claim for tax refund, to determine once and for all in a single proceeding the true and correct amount of the tax due or refundable. " !,. @ay a taxpayer who has pen#in" caims for ref$n# of excess A9T inp$t tax ref$n# or set off sai# caims a"ainst his other tax iabiities? 5o. #axes and claims for refund cannot be the subject of set+off for the simple reason that the government and the taxpayer are not creditors and debtors of each other. #here is a material distinction between a tax and a claim for refund. !laims for refunds just li&e debts are due from the government in its corporate capacity, while taxes are due to the government in its sovereign capacity. >owever, compromise or set+off may be available but only if bot% obli,ations are li4ui'ate' an' 'eman'able . Di8uidated debts are those where the exact amounts have already been determined. $n the instant case, the claim of the taxpayer for :A# refund is still pending and the amount has still to be determined. #hus, the li8uidated obligation of the taxpayer to the government cannot be set+off against the unli8uidated claim which the taxpayer conceived to exist in his favor. ""
42 43 44
CIR v. Citytrust Baning Corp ., !99 '(R) !&& *200+ CIR v. CA, Citytrust Baning Corp. and C&A, 2#! '(R) #!8 *199!+
P%ile0 Mining v. CIR, GR 12$&0!, )u4. 29, 1998
+II. ompromise
!. When is compromise a"reement? A compromise agreement is a contract whereby the pares, by main! reciproca" concessions, a#oi$ a "i!aon or p%t an en$ to one a"rea$y commence$&45 $t involves a reduction of a personFs tax liability.
Accordingly, a compromise is either 3u'icial, if the objective is to put an end to a pending litigation, or extra3u'icial, if the objective is to avoid a litigation."-ts 5alidit is dependent upon the fulfillment of the re;uisites and principles of contracts dictated b law% and its terms and conditions must not be contrar to law, morals, 4ood customs, public polic, and public order.
A compromise is generally allowed and enforceable under the law when the subject matter thereof is not prohibited from being compromised and the person entering such compromise is duly authori7ed to do so. +III. Doctrine of ompensation an' Set&!ff
!0. Disc$ss the “Doctrine of /ompensation an# )etB=ff.” @ay taxes be the s$b-ect of setBoff or compensation? Cenera ;$e #he octrine of !ompensation and 6et+off states that taxes are 5# subject to set+off or legal compensation because the government and the taxpayer are not mutual creditor and debtor of each other."4
!$
)rt, 2928, ew (i5il (ode !
Malvar v. 3ra#t Food P%ils., Inc., &0$ '(R) 2!2 *201#+
!&
a4banua 5. >, !9& "hil. $11 *200$+ cited in etro anila 'hoppin4 ecca (orp. 5. (it reasurer of anila, GR 190818, o5. 10, 201! 48
Republic v. Ma!bulao Lu!ber Co., '(R) $22% Calte0 P%ils v. C2A, 208 '(R) &2
$t is settled that a taxpayer may not offset taxes due from the claims that he may have against the government for the following reasons3 '1( A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set+off. '2( #axes are of such distinct &ind, essence and nature, and these impositions cannot be classed in merely the same category as ordinary obligations. #axes and debts are of different nature and character/ hence, no set+off or compensation between these two different classes of obligations is allowed. '( #he taxes assessed are the obligations of the taxpayer arising from law, while the money judgment against the government is an obligation arising from contract, whether express or implied. '"( ebts are due to the overnment in its corporate capacity, while taxes are due to the overnment in its sovereign capacity. "9 '%( $nasmuch that taxes are not debts, it follows that the two obligations are not susceptible to set+off or legal compensation. '-( #here can be no off+setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount e8ual to or greater than the tax being collected. #he collection of a tax cannot await the results of a lawsuit against the government. %< Examples3 'a( An assessment for a local tax cannot be the subject of set+off or compensation against a final judgment for a sum of money obtained by the taxpayer against the local government unit that made the assessment. 'b( A taxpayer who has pending claims for :A# input credit or refund cannot set off said claims against his other tax liabilities. 'c( #he income tax liability of a taxpayer cannot be compensated with the amount owed by the overnment as just compensation for his property which had been expropriated. 49
Sout% A#rican Air$ays v. CIR, 12 '(R) $ *2010+
50
Francia v. IAC, GR / &&!9, June 28, 1988 *12 '(R) &$#+
8xception >owever, if the obligation to pay taxes and the taxpayerFs claim against the government have already become both due, and demandable, as well as fully li8uidated, compensation ta(es place by operation of law56 and both obligations are extinguished to their concurrent amounts. %2 A debt is li8uidated when its existence and amount are determined. A debt is considered li8uidated, not only when it is expressed already in definite figures which do not re8uire verification, but also when the determination of the exact amount depends only on a simple arithmetical operation. % I7. Doctrine of E4uitable #ecoupment
!. What is the meanin" of the term “Doctrine of 86$itabe ;eco$pment”? BQ2009 #he doctrine of He'uitable recoupmentG arose from common law origin allowing the offsetting of a prescribed claim for refund against a tax liability arising from the same transaction on which an overpayment is made on one hand and underpayment is due on the other hand. $n other words, when the refund of a tax supposedly due to the taxpayer has already been barred by prescription, and the same taxpayer is assessed with a tax at present, the two taxes may be set+off with each other. $t allows a taxpayer whose claim for refund has prescribed to offset tax liabilities with his claim of overpayment. But this doctrine of e8uitable recoupment is allowed only in common law countries, but 5# in the =hilippines. $t finds no application to cases where the taxes involved are totally unrelated, and although it seems e8uitable, $# $6 5# ADDWE $5 * J*$6$!#$5 because of the doctrine of no set+off or compromise. %" 7. Tax Amnesty
!3. What is the meanin" of “tax amnesty”? “Tax amnesty” is a general grant of pardon or the intentional overloo&ing by the 6tate of its authority to impose penalties on persons otherwise guilty of violation of a tax law. $t parta&es of an absolute $1
)rt. 1200, in relation to )rts. 12&9 and 1290, ((
52 53
)o!ingo v. -arlitos, 8 '(R) !!# *19#+ P%ile0 Mining Corp. v. CIR, GR 12$&0!, )u4. 29, 1998%. Monte!ayor v. Millora, $! '(R)
$80 *2011+ 54
Collector v. 1S& , 10! "hil. 102 *19$8+
waiver by the government of its right to collect what otherwise would be due it and to give tax evaders who wish to relent a chance to start with a clean slate. A tax amnesty, much li&e a tax exemption, is never favored nor presumed in law and if granted by statute, the terms of the amnesty li&e that of a tax exemption must be construed strictly against the taxpayer and liberally in favor of the taxing authority. %% $t also gives the government a chance to collect uncollected tax from tax evaders without having to go through the tedious process of a tax case. %“Tax amnesty8 refers to the articulation of the absolute waiver by a sovereign of its right to collect taxes and power to impose penalties on persons or entities guilty of violating a tax law. #ax amnesty aims to grant a general reprieve to tax evaders who wish to come clean by giving them an opportunity to straighten out their records. %0 %5. Distin"$ish >tax amnesty> from >tax exemption.> Tax Amnesty #ax amnesty is an immunity from all criminal2 civil an' a'ministrative liabilities arisin, from non&payment of taxes. $t is a general pardon given to all taxpayers. $t applies only to past tax periods, hence of retroactive application.%4 $n a tax amnesty, however, there will be a revenue loss since there was actually taxes due but the collection was just waived by the overnment.
Tax Exemption #ax exemption is an immunity from t%e civil liability only . $t is an immunity or privilege, a freedom from a charge or burden to which others are subjected. $t is generally prospective in application. $n tax exemption, there is no revenue loss because there was no actual taxes due as the person or transaction is protected by tax exemption.
%1. Eow sho$# tax amnesty be constr$e#? While tax amnesty, similar to a tax exemption, must be construed strictly against the taxpayer and liberally in favor of the taxing authority, it is also a well+settled doctrine that the rule+ma&ing power of administrative agencies cannot be extended to amend or expand statutory re8uirements or to embrace matters not originally encompassed by the law. Administrative regulations should always be in accord with the provisions of the statute they see& to carry into effect, and any resulting inconsistency shall be resolved in favor of the basic law. %9 55
CIR v. -onzalez , ## '(R) 1#9 *2010+
56
I"- Ban ".+., Manila Branc% v. CIR, GR 1&&9, Jul 22, 201$
57
MB&C v. CIR, G.R. 1&8&9&, )u4. !, 2009 *$9$ '(R) 2#!+ cited in CS -ar!ent, Inc. v. CIR, GR 182#99, arch 12, 201! 58
People v. Castaneda, GR !881, 'ept. 1$, 1988
59
CS -ar!ent, Inc. v. CIR , G.R. 182#99, arch 12, 201!
%2. @ay the cre#itabe withho#in" taxes be the s$b-ect of tax amnesty? 5o. Just li&e in the compromise settlement of tax liability of a taxpayer, withholding taxes cannot fall within the coverage of tax amnesty because the same is not one of the taxes for which a taxpayer is directly liable. Withholding tax is just a mode of collecting the tax and the tax that is being withheld is treated as a trust fund which should be remitted to the government because it is not a personal tax liability of the withholding agent, but that of the payor, which should have been remitted to the government when the same was withheld from the taxpayer.-< 7I. Tax Pyrami'in,
%!. What is the meanin" of >tax pyrami#in">? What is its basis in aw? BQ2006
“Tax pyrami#in"” refers to the imposition of a tax upon a tax. #his occurs when some or all of the stages of distribution of goods or services are taxed, with the accumulation borne by the final consumer. #here is tax pyramiding when sales taxes are applied to both inputs and outputs, thus shifting all the tax burden to the end consumer. $t has no basis whether in fact or in law because it violates the principle of uniformity and neutrality in taxation. #ax pyramiding has, since 1922, been rejected by the 6upreme !ourt, the legislature, and our tax authorities.-1 7II. Doctrine of Piercin, t%e +eil of orporate "iction
%%. What is the “Doctrine of Piercin" the Aei of /orporate
*nder the Hdoctrine of piercing the veil of corporate fiction ,G the court loo&s at the corporation as a mere collection of individuals or an aggregation of person underta&ing business as a group, disregarding the separate juridical personality of the corporation unifying the group. -2 Another formulation of this doctrine is that when two business enterprises are owned, conducted and controlled by the same parties, both law and e8uity will, when necessary to protect the rights of third parties, disregard the legal fiction that two corporations are distinct entities and treat them as identical or as one and the same. - 0
RMC 61-2014 (July 30, 2014)
61 62 63
CIR v. A!erican Rubber Co ., 18 '(R) 8!2 *19+% "p. 5. 'andi4anaan, !& '(R) 1#& *200$+ 3uan International Corp. v. Reyes, #1 '(R) $9 *2010+ Pantranco !ployees Association v. "LRC , GR /1089, arch 1&, 2009 *$81 '(R) $98 +
$t was held that while a corporation may exist for any lawful purpose, the law will regard it as an association of persons or, in case of two corporations, merge them into one, when its corporate legal entity is used as a cloa& for fraud or illegality. #he doctrine applies only when such corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or where the corporation is so organi7ed and controlled and its affairs are so conducted as to ma&e it merely an instrumentality, agency, conduit or adjunct of another corporation. %,. @ay the stoc&ho#ers be he# personay iabe for the $npai# taxes of a #issove# corporation? A corporation, upon coming into existence, is invested by law with a personality separate and distinct from those of the persons composing it as well as from any other legal entity to which it may be related. ?or this reason, a stoc&holder is generally not made to answer for the acts or liabilities of the corporation, and vice versa. #he separate and distinct personality of the corporation is, however, a mere fiction established by law for convenience and to promote the ends of justice. $t may not be used or invo&ed for ends that subvert the policy and purpose behind its establishment, or intended by law to which the corporation owes its being. #his is true particularly when the fiction is used to defeat public convenience, to justify wrong, to protect fraud, to defend crime, to confuse legitimate legal or judicial issues, to perpetrate deception or otherwise to circumvent the law. #his is li&ewise true where the corporate entity is being used as an alter ego, -" adjunct, or business conduit for the sole benefit of the stoc&holders or of another corporate entity. $n such instances, the veil of corporate entity will be pierced or disregarded with reference to the particular transaction involved.-% #hus, as a general rule, stoc&holders cannot be held personally liable for the unpaid taxes of a dissolved corporation. #he rule prevailing under our jurisdiction is that a corporation is vested by law with a personality that is separate and distinct from those of the persons composing it.->owever, stoc&holders may be held liable for the unpaid taxes of a dissolved corporation if it appears that the corporate assets have passed 64
-n applin4 the "instrumentality" or" alter ego" doctrine , the courts are concerned with realit, not form, and with how the corporation operated and the indi5idual defendant?s r elationship to the operation. 65
Land Ban o# t%e P%ilippines v. Court o# Appeals, G.R. 12&181, 'ept.. !, 2001 *#! '(R) #&$+ cited in C!!i""ine# $ Cu"t!" %. &ilin' nte#ntinl C#*., GR 11&$9, Jul 2, 201! 66
Sunio v. "LRC, 12& '(R) #90 *198!+
into their hands.-0 Di&ewise, when stoc&holders have unpaid subscriptions to the capital of the corporation, they can be made liable for unpaid taxes of the corporation to the extent of their unpaid subscription. 7III. Doctrine of sa,e
%. What is the “Doctrine of :sa"e”? #his is the test of exemption on real property tax provided in the 1940 !onstitution which mandates that such real properties of non+stoc& non+profit educational institutions shall be exempt from the real property tax if the said properties are actually2 'irectly an' exclusively SED for reli,ious2 c%aritable or e'ucational purpose. #he gauge of exemption is the SE of t%e property2 N!T t%e owners%ip2 and in accordance with the enabling law under 6ec. 2" -4 of the Docal overnment !ode of 1991. 7I+. $ars%all Dictum
%0. What #oes the “@arsha Dict$m” state? #he $ars%all Dictum9: states that Hthe power to tax is the power to #estroy”* which refers to the unlimitedness and the degree or vigor with which the taxing power may be employed to raise revenue. #he financial needs of the 6tate may outrun any human calculation, so the power to meet those needs by taxation must not be limited even though taxes become burdensome or confiscatory. >owever, Iarshall ictum has no application to a lawful tax. #his may be true only if the Degislature has no power to tax. $t has no relation to a case where such right exists, because the power to destroy
67
&an &iong Bio v. CIR, ! '(R) 98 *192+
68
S+C. 234. 0e!ptions #ro! Real Property &a0. / he followin4 are exempted from pament of the real propert tax@ *a+ Real propert owned b the Republic of the "hilippines or an of its political subdi5isions ece*t when the beneficial use thereof has been 4ranted, for consideration or otherwise, to a taxable person% *b+ (haritable institutions, churches, parsona4es or con5ents appurtenant thereto, mos;ues, nonprofit or reli4ious cemeteries and all lands, buildin4s, and impro5ements actuall, directl, and exclusi5el used for reli4ious, charitable or educational purposes% *c+ )ll machineries and e;uipment that are actuall, directl and exclusi5el used b local water districts and 4o5ernment/owned or /controlled corporations en4a4ed in the suppl and distribution of water andAor 4eneration and transmission of electric power% *d+ )ll real propert owned b dul re4istered cooperati5es as pro5ided for under R. ). o. 9#8 *now R) 9$20+% and *e+ achiner and e;uipment used for pollution control and en5ironmental protection. xcept as pro5ided herein, an exemption from pament of real propert tax pre5iousl 4ranted to, or presentl en7oed b, all persons, whether natural or 7uridical, includin4 all %e#n!ent-ned # -cnt#lled c#*#tin" are hereb withdrawn upon the effecti5it of this (ode. 4Local -overn!ent Code5 9
(M#"/ll ictu!) 1.S. C%ie# *ustice Mars%all in McCulloc% v. Maryland , 1& >.'. #1, !
may be a conse8uence of taxation but it cannot and should not tax to the point of being confiscatory. 7+. ;olmes Doctrine
%. What #oes the “Eomes Doctrine” state? #he ;olmes Doctrine2<= on the other hand, states that Hthe power to tax is not the power to #estroy whie the )$preme /o$rt sits. G #he power to tax &nows no limit except those expressly stated in the !onstitution.$t only means that in the exercise of the taxing power, the authority should not violate the !onstitutional, inherent and contractual limitations of taxation, otherwise the court has the primordial duty to declare the same void and unconstitutional, thereby preventing the destructive nature of the power of taxation. 7+I. Doctrine of Estoppel
%3. Eow is the >Doctrine of 8stoppe> appie# in taxation? Is there any exception? Cenera ;$e $t is rule in taxation that estoppel does not apply to the government, especially on matters of taxation. $t does not prevent the government from collecting taxes/ it is not bound by the mista&e or negligence of its agents. #he rule is based on the political law concept the ing can do no wrong,!" which li&ens a state to a &ing/ it does not commit mista&es, and it does not sleep on its rights. #he analogy fosters ine8uality between the taxpayer and the government, with the balance tilting in favor of the latter. #his concept finds justification in the theory and reality that government is necessary, and it must therefore collect taxes if it is to survive. #hus, the mista&e or negligence of government officials should not bind the state, lest it bring harm to the government and ultimately the people, in whom sovereignty resides. 02 *pon taxation depends the ability of the government to serve the people for whose benefit taxes are collected. #o safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people.) 0
&0
Pan%andle 2il Co. v. Mississipi e0 rel 3no0 2&& >.'. 2## *1928+ *Justice li5er
Jr.+ 71
ric R. Recalde, A &reatise on &a0 Principles and Re!edies, p. ## *2009+
72
CIR v. Procter ( -a!ble PMC, GR /8#8, )pril 1$, 1988 *10 '(R) $0+, cited in CIR v. Raul M. -onzales, G.R. 1&&2&9, ct. 1#, 2010 73
+isayas -eot%er!al Po$er Co!pany v. CIR , G.R. 19&$2$, June !, 201! *&2$ '(R) 1#0+ cited in CIR v. "ippon 0press 4P%ils5 Corp., GR 212920, 'ept. 1, 201$
#axes are the nationFs lifeblood through which government agencies continue to operate and with which the 6tate discharges its functions for the welfare of its constituents. 0" 8xception >owever, while the 6tate in the performance of governmental function is not estopped by the neglect or omission of its agents, and nowhere is this truer than in the field of taxation, yet this principle cannot be applied to wor& injustice against an innocent party. $n one case , the !ourt held that )admittedly the government is not estopped from collecting taxes legally due because of mista&es or errors of its agents, but li&e other principles of law, this admits of exceptions in the interest of justice and fair play, as where injustice will result to the taxpayer by &eeping the latter in the dar& for so long, as to whether it is liable for the tax and, if so, for how much.) 0% 7+II. Presumption #e,ar'in, t%e onstitutionality or +ali'ity of Tax Laws
,5. What is the meanin" of “Pres$mption re"ar#in" the constit$tionaity or vai#ity of tax aws”? #he constitutionality or validity of tax laws, orders, or such other rules with the force of law cannot be attac&ed collaterally. #here is a legal presumption of validity of these laws and rules, and unless a law or rule is annulled in a direct proceeding, the legal presumption of its validity stands. 0Every presumption must be indulged in favor of the constitutionality of a statute. #he burden of proving the unconstitutionality of a law rests on the party assailing the law. $n passing upon the validity of an act of a co+e8ual and coordinate branch of the government, courts must ever be mindful of the time+honored principle that a statute is presume' to be vali' .00 7+III. Presumption of #e,ularity in t%e Performance of !fficial Duty > Doctrine of ?oo' "ait%
,1. What is the meanin" of “pres$mption of re"$arity in the performance of officia #$ty”?
&!
75 76 77
CIR v. Petron Corp., 8 '(R) &#$ *2012+ Republic v. 3er ( Co., 12! "hil. 822 *19+% CIR v. -onzalez, ## '(R) 1#9 *2010+ C%evron P%ils., Inc. v. Co!!issioner o# Custo!s , $1 '(R) &10 *2008+ Republic v. Caguioa, GR 18$8!, ct. 1$, 200&*$# '(R) 19#+
#he presumption of regularity in the performance of official duty cannot by itself overcome the presumption of innocence nor constitute proof of guilt beyond reasonable doubt.04 ,2. What is the pres$mption re"ar#in" the assessments ma#e by the /ommissioner or by his #$y a$thorie# representatives? #ax assessments made by the !$ or by his duly authori7ed representative shall be prima facie presumed correct and made in good faith, and all presumptions are in favor of the correctness of a tax assessment unless proven otherwise. 09 #he taxpayer has the burden of proof of showing the incorrectness or inaccuracy of such assessment or its details lies with the taxpayer. $n the absence of proof of any irregularities in the performance of duties, an assessment duly made by a Bureau of $nternal evenue examiner and approved by his superior officers will not be disturbed. Even an assessment based on estimates is prima facie valid and lawful where it does not appear to have been arrived at arbitrarily or capriciously. #he burden of proof is upon the complaining party to show clearly that the assessment is erroneous. ?ailure to present proof of error in the assessment will justify the judicial affirmance of said assessment. All presumptions are in favor of t%e correctness of tax assessments. 4< ,!. What is the meanin" of “Doctrine of Coo#
,%. What is the meanin" of “Doctrine of 8xha$stion of 9#ministrative ;eme#ies”? $t is settled that the premature invocation of the court@s intervention is fatal to one@s cause of action ++ if a remedy within the 78 79
+aldez v. People , GR 1&0180, o5. 2#, 200& *$#8 '(R) 11+ CIR v. -onzalez, ## '(R) 1#9 *2010+
80
CIR v. 3udos Metal Corp., G.R. 1&808&. a $, 2010 CIR v. &raders Royal Ban, G.R. / 1&1#!, arch 18, 201$ 81
Civil Service Co!!ission v. Maala, G.R. 1$$2#, )u4. 18, 200$ *!& '(R) #90+
administrative machinery can still be resorted to by giving the administrative officer every opportunity to decide on a matter that comes within his jurisdiction then such remedy must first be exhausted before the court@s power of judicial review can be sought. #he party with an administrative remedy must not only initiate the prescribed administrative procedure to obtain relief but also pursue it to its appropriate conclusion before see&ing judicial intervention in order to give the administrative agency an opportunity to decide the matter itself correctly and prevent unnecessary and premature resort to the court.42 5onetheless, jurisprudence allows certain exceptions to the rule on exhaustion of administrative remedies. #he doctrine of exhaustion of administrative remedies is a relative one and its flexibility is called upon by the peculiarity and uni8ueness of the factual and circumstantial settings of a case. >ence, it is disregarded '1( when there is a violation of due process, '2( when the issue involved is purely a legal 8uestion, '( when the administrative action is patently illegal amounting to lac& or excess of jurisdiction, '"( when there is estoppel on the part of the administrative agency concerned, '%( when there is irreparable injury, '-( when the respondent is a department secretary whose acts as an alter ego of the =resident bears the implied and assumed approval of the latter, '0( when to re8uire exhaustion of administrative remedies would be unreasonable, '4( when it would amount to a nullification of a claim, '9( when the subject matter is a private land in land case proceedings, '1<( when the rule does not provide a plain, speedy and ade8uate remedy, '11( when there are circumstances indicating the urgency of judicial intervention, and '12( when the exhaustion will result in an exercise in futility. 4 77. Doctrine of !perative "act
,,. What is the “Doctrine of =perative
RCBC v. CIR, G.R./1&02$&, 'ept. &, 2011
83
Co!!issioner o# Custo!s v. 2ilin Intl. Corp., GR 1617, July 2, 2014 Banco )e 2ro v. RP ( CIR, G.R. 198&$, Jan. 1#, 201$
#he E5EAD *DE is that a void law or administrative act cannot be the source of legal rights or duties. Article 0 of the !ivil !ode enunciates this general rule, as well as its exception. HDaws are repealed only by subse8uent ones, and their violation or non+observance shall not be excused by disuse, or custom or practice to the contrary. When the courts declared a law to be inconsistent with the !onstitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the !onstitution.G #he “#octrine of operative fact” is, however, an E7EPTI!N to that general rule, such that it recogni7es that a judicial declaration of invalidity may not necessarily obliterate all the effects and conse'uences of a void act prior to such declaration .4" A legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with. #his doctrine is in fact incorporated in 6ection 2"- of the #ax !ode which provides that taxpayers may rely upon a rule or ruling issued by the !ommissioner from the time the rule or ruling is issued up to its reversal by the !ommissioner or by the !ourt. #he reversal is not given retroactive effect. #his, in essence is the doctrine of operative fact. #here must, however, be a rule or ruling issued by the !ommissioner or by the judiciary that is relied upon by the taxpayer in good faith. A mere administrative practice, not formali7ed into a rule or ruling, will not suffice because such a mere administrative practice may not be uniformly and consistently applied. An administrative practice, if not formali7ed as a rule or ruling, will not be &nown to the general public and can be availed of only by those with informal contacts with the government agency.4% 77I. Principle of @Pacta Sunt Servan'a8
,. What is the principe of “Pacta )$nt )ervan#a”? #he =hilippine !onstitution provides for adherence to the general principles of international law as part of the law of the land. #he time honored international principle of +pacta sunt servanda demands the performance in good faith of treaty obligations on the part of the states that enter into the agreement. $n this jurisdiction, treaties have the force and effect of law.484
Republic v. CA, GR &9, o5. 8, 199# *22& '(R) $09+
85
CIR v. San Ro6ue Po$er Corp., GR 18&!8$, ct. 8, 201# CIR v. Puregold )uty Free, Inc., GR 202&89, June 22, 201$ 86
)eutsc%e Ban A- Manila Branc% v. CIR, cited in CB3 Po$er Co. Ltd. v. CIR7CIR v. CB3 Po$er Co. Ltd. v. CIR,, G.R. 19##8#/8!AG.R. 19#!0&/08, Jan. 1!, 201$
77II. Doctrine of @Stare Decisis8
,0. What is the Doctrine of “)tare Decisis”? #ime and again, the !ourt has held that it is a very desirable and necessary judicial practice that when a court has laid down a principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the same. tare decisis et non 'uieta movere. 6tand by the decisions and disturb not what is settled. tare decisis simply means that for the sa&e of certainty, a conclusion reached in one case should be applied to those that follow if the facts are substantially the same, even though the parties may be different. $t proceeds from the first principle of justice that, absent any powerful countervailing considerations, li&e cases ought to be decided ali&e. #hus, where the same 8uestions relating to the same event have been put forward by the parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue.40 77III. Principle of ?oo' ?overnance
,. Eow sho$# the principe of "oo# "overnance be appie#? #he principle of good governance cannot, should not, be triviali7ed nor oversimplified by tenuous whimpering and individualism intended to detract from the urgent need to cleanse the epublic from a mainstream culture of unabated corruption, perpetuated with impunity and sense of self+entitlement. #he issue at hand is not about who, but what/ it is not about individual loss, but about national gain. Whether from the birth pains of reform, this nation can gain a foothold, nay, a stride into restoring this nation into its prideful place from the clutches of a H&eptocratic mafia” that had gained a strangehold into one of the nationFs primary sources of revenue. 44 77I+. Doctrine of Primary A'ministative uris'iction
,3. What is the “Doctrine of Primary 9#ministrative F$ris#iction”? #he octrine of =rimary Administrative Jurisdiction states that Hcourts will not determine a controversy where the issue for resolution demand the exercise of sound administrative discretion re8uiring the 87
Fort Boni#acio )evt. Corp. v. CIR, G.R. os. 1&$&0& A 1800#$ A 181092, o5. 19, 201!% RP, represented by t%e Bureau o# Custo!s v. Pilipinas S%ell Petroleu! Corp. , GR 209#2!, ec. 9, 201$ 88
)2F v. *udge Marino M. de la Cruz, *r ., GR 209##1, )u4. 2!, 201$
special &nowledge, experience and service of the administrative tribunal to determine technical and intricate matters of fact.G 49
89
"estle P%ils, Inc. v. 1ni$ide Sales, Inc. #! '(R) 2#2 *2010+
